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Mr MIKE BAIRD (Manly) [10.52 p.m.]: I support the motion of no confidence in the Government. It is incredible for a Government at its 18-month mark to be at such a low ebb in the view of a broad spectrum of the community. The Government has got to the point where it cannot hide. After almost 14 years of financial mismanagement, on street corners, in town halls and hospital waiting rooms and at stations and ferry wharves, wherever you go, people are saying they have had enough. The reasons why they have had enough are compelling rationale for the Government to say, "We have got it wrong. We believe that the people of New South Wales deserve a better Government. We will go back to the people, put a new vision to them and let the people have a say."
I want to focus on finance. Today the Rees Government admitted that it does not have the capability to manage itself out of this mess. It has appointed Bernie Fraser and Ian Macfarlane. We do not begrudge the appointment of experts in any matter. Indeed, if experts, rather than mates, had been appointed to administer the State, we would be in a much better position than we are today. The Government appointed Bernie Fraser and Ian Macfarlane within a week or two of appointing the new Treasurer and the new Minister for Finance. Obviously the Premier said, "I hope you like the jobs but we want to get someone we can trust to get us out of this financial mess." How did the Government get in such a mess that it needs Bernie Fraser and Ian Macfarlane to pull it out?
Today the new Treasurer, reading diligently from the copious notes that were put before him by staff, let the genie out of the bottle. He said that Standard and Poor's had confirmed that the credit watch was due to the net financial liabilities. That is, the Carr-Iemma-Rees-Bitar-Tripodi Government has led us to the point that the State is on credit watch. The State is in crisis and is in a position where there is no money left. That is what they are telling us, and the appointment of Bernie Fraser and Ian Macfarlane confirms it. The debt binge, which has been laid out by the Leader of the Opposition, has come at the worst possible time. It is happy days when record revenues—an unbudgeted $17.5 billion—are rolling in. There is no need for accountability or discipline.
The Government has had a general gun-slinging, western saloon style, she'll be right attitude. Do whatever you like; pay whatever bill you want. It does not matter, it will all come out in the wash. The chickens have come home to roost. Under the naked glare of one of the worst financial crises the world has ever seen—indeed, Alan Greenspan has said it is a once in a century event—the Government's lack of discipline over the past 13 to 14 years and an administration that got it horribly wrong have led the State up the garden path. The revenues in economic activity are collapsing, combined with a huge increase in debt. It is the worst combination at the worst possible time.
I will refer to the key financial points to show why we have lost confidence in this administration. In market terms, it equates to a management team that has failed to deliver for its stakeholders. How do rating agencies make their assessments on credit ratings? Moody's assigns a rating based on an institutional framework, past behaviour and individual characteristics. Thus, rating committees are able to distinguish between other governments in the same jurisdiction. A whole range of parameters goes into a rating and it takes considerable time to get to the point of a credit watch. In this country only New South Wales is on credit watch. They have observed the Government's complete lack of historical financial discipline and its huge debt splurge. In June Standard and Poor's said that the debt funding of new generation capacity would likely put the State credit rating under pressure. Of course, there was no mention of that in the budget. I will come back to that. Standard and Poor's also spoke about a failure to maintain operating surpluses, which would likely put the credit rating under pressure.
The Vertigan and Stokes audit, commissioned by the Government in 2006, found that since 2000-01 average growth in expenses have exceeded the growth in revenues by one percentage point; total expenses have risen faster than growth in the economy over the last five years; and this situation raised important procedures and processes that prioritise existing and new expenditures. The Vertigan and Stokes audit showed what was wrong. I will give Cabinet a tip. The Government must understand that if expenses grow faster than revenue it is going backwards. That has been going on for 13 to 14 years. It was highlighted in a special report to Cabinet in 2006, but it was ignored. In March 2007 a report by the Reliability Panel highlighted the risk created by mismanagement. The report stated, "The biggest risk to New South Wales rating is the operating performance." That performance is managed by this team. Standard and Poor's, who cut its outlook from stable to negative, said it would watch to see how the Government reprioritised its capital works program in the mini-budget. Tonight it is worth pointing out that there are a couple of risks. Standard and Poor's said:
The mini-budget is not in itself a sufficient condition to return the outlook to stable. We will need to believe that the Government has the political willingness and ability to execute what is likely to include unpopular decisions.
The rating agency also said:
The trend of increasing debt cannot continue indefinitely without threatening existing ratings.
Whatever happens in the mini-budget, Standard and Poor's are on watch. The Government has led us to this point: it is the Government's mismanagement, a complete lack of fiscal discipline and a debt splurge that has gone with it. In relation to the second part of the situation, infrastructure and the black hole that has effectively been created, Standard and Poor's stated that a surplus would need to be ongoing. But let us look at some of the points on infrastructure in particular. On 24 June 2008 the Treasurer told Parliament:
No items in the infrastructure strategy are dependent upon the Government's electricity plans.
The Government's June budget estimates forecast a surplus of $268 million but Treasury officials recently informed Mr Rees of the $1 billion shortfall during his first Cabinet meeting. As soon as that came to light our new Premier said he did not have the time or the inclination to discuss it. That could have been a poor choice of words at a particularly poor time, but any Premier that is faced with a $1 billion shortfall would surely understand that that is a huge priority, whatever he is doing. The words "no time or inclination to discuss it" give an insight into the culture of the people who sits around the Cabinet table. Cabinet members do not care about expenses; they do not care about the consequences of their actions—and that is the core of the problem. Until you get some accountability, until you get some aggressive understanding that budget allocation is sacrosanct and that a lack of performance results in dismissal of the Minister, you will not change the problem.
The Premier also said he had no explanations of how the black hole had come about. We all heard what Treasurer Costa said—that colourful display of bile and wonderment. He said that the Government had already overcommitted on spending by $500 million. Areas such as transport were planning a further $3 billion, which the State could not afford. Treasurer Costa said:
Capital programs are about $2 billion too ambitious. I have been advised by the health Minister that health recurrent expenditure has blown out by approximately $300 million this year. And, in addition, that the health 10-year capital program is overcommitted at the moment to the tune of half a billion dollars.
Those are not small numbers and they show what is wrong: not only can the Government not control recurrent expenditure; it cannot control capital expenditure. We have had a number of examples of projects that have gone over time and over cost, and no-one is being held to account. That is why we are here tonight debating this no-confidence motion. It is time that someone in the Government is held to account for the decisions it is making and actually executes those decisions, because recurrent expenditure continues to blow out, as does capital expenditure. Alan Greenspan has already labelled the situation "a once-in-a-century type of financial crisis", and when there is this complete lack of fiscal discipline, "once in a century" starts to become very perilous for the State.
Mr Barry Collier: He is an American economist. He is the former chairman of the Federal Reserve. What has the Federal Reserve got to do with New South Wales?
Mr MIKE BAIRD: You should look him up; you might learn something. Employee expenses for front-line workers is also an important point. We hear much from the Labor Party on how it is the champion of working families. We hear much from the Labor Party about how it stands up for the workers. Front-line worker groups who ask this Government for pay increases are paying for the Government's financial mismanagement. There are no funds to provide these front-line workers with pay increases because members of the Government have been filling their own pockets, looking after their own perks, paying for their mates and filling spin teams rather than putting the money back into front-line workers.
Professor Henry Ergas, at a Senate select committee in July, revealed that salaries in the New South Wales public sector had risen by 51.5 per cent over the 10 years to June 2007. That was 14 percentage points higher than the private sector. The important point about this is not that the public sector has not received more money but where the money has gone. It has not gone to the people it should have gone to. I am happy to include us in the same analysis. Members of Parliament have received a 55 per cent pay rise, and that seems completely at odds with what our front-line workers have received. A nurse's base salary is $45,797; a teacher's base salary is $49,050; and a police officer's base salary is $51,000. Yesterday we heard the news that teachers are still fighting for a pay rise that keeps up with inflation. Where has the money gone?
I will tell the House where the money has gone and why we are not able to pay the front-line workers what they should be paid and what they deserve: the Iemma Government had 335 media and policy staff, and that compares with 17 for the New South Wales Opposition—and the 17 do an incredible job serving the public and serving the Opposition. But the Iemma Government spent on its media and policy staff last year $63.8 million. Last Easter the Iemma Government advertised for seven spin doctors, offering a total of $628,634 in salaries. This is not a government that is in touch with the needs of the community; it is not looking after its front-line workers; it is feathering its own nest and its money is going to its mates, to spin teams and to its own little enclaves.
I move on to the State Super Fund, and this again picks up a culture of a lack of discipline. When a government starts to have heat turned on to its budgetary performance what does it do? It has to start cooking the books. It has to find a way to squeeze money out of places where it should not. The State Super Fund has had a $2.7 billion loss this year, which is the reason this Government has started to reach for some of the assets. The annual losses in First State Super Fund were close to $1 billion. Not only are we not paying our front-line workers; most of our public servants lost 6.8 per cent during the last year, which was above the industry average of 6.4 per cent. It was a bigger loss than expected. The Government has admitted in this budget that it manipulated the State Super Fund: it understated its future unfunded super liabilities by about $7 billion.
By using old accounting standards the unfunded super liability peaks at about $12 billion, but if the current standards are used—the accounting standards that every other corporation currently uses—it would be $19 billion. The Government has managed to take away $7 billion and pretend that liability does not exist. That means that with every budget it produces the Government does not have to provide hundreds of millions of dollars because it is pretending the liability does not exist. In 2007-08 the budget amended some of the assumptions underlying this calculation, which obviously reduced its unfunded liabilities. It changed the investment return assumption from 7 per cent to 7.7 per cent. How does 7.7 per cent compare with the 6.8 per cent that was lost last year? It increased the discount rate from 7 per cent to 7.3 per cent—again, the only State in the country to use a rate different from the long-term bond rate. Most other States, and the Federal Government, used a figure of 6 per cent.
The Government has apparently ignored the ageing population and has said there will be increased pensioner mortality rates. These sorts of management practices are not out of step with those of corporate cowboys. The Coalition successfully amended the Superannuation Administration Amendment Bill 2008 in April because the Treasurer was proposing to give himself the authority to access the superannuation reserves of public sector employees and to transfer the funds to other accounts. These practices raised doubt about the veracity of management. If the Carr-Rees-Iemma-Bitar-Tripodi Government is happy to use public servants' money to manipulate super for short-term budget results, what else has it done? It is on this premise that we start to wonder.
We do not know what is going on but we know that the culture is not right. We know that the Government cannot control its recurrent income; we know it cannot control its capital budgets; and now it is starting to play with things such as superannuation. It is a very serious problem and they are deferring it for future generations to address. The public of New South Wales needs to know about that and it deserves some answers.
The airport duty is another example of this Government's activities. The ratings agencies said that they wanted to see surpluses, so the Government pretended to the world that it was producing them. In the 2007-08 budget, when it needed a surplus of $368 million, it was in $40 million or $50 million in the red. It submitted an invoice for $401 million in land tax due on Sydney airport. As a result it had a surplus. At the time Peter Costello said it was rubbish and Morris Iemma said that the Federal Coalition was a bunch of cowboys and that they needed to be responsible. Lindsay Tanner has also said that the claim was rubbish. The Government fabricated $401 million to make it look as though the State had a surplus. It is also dipping into the teachers', nurses' and police officers' superannuation funds. This Government's financial platform is about to collapse. The people of New South Wales deserve to know that this mob on the other side, which can be very loosely called a management team with some capacity, is jeopardising everything we have in this State.
Where has the money gone? Over the past 13 years we have heard about windfall taxpayer revenue of $17.5 billion and dividends have also been plundered. Freedom of information documents show that the Iemma Government's bill for office space in the CBD was $118 million a year, including $15 million rising to $20 million for lovely plush offices in the Governor Macquarie Tower. Why not throw in $7 million for car parking? Those expenses show that the Government is completely out of touch.
I have spoken about State debt before and the Leader of the Opposition clearly articulated the situation. The important point is that if a government has crumbling revenue and a deteriorating economic position, and if it is increasing debt like a drunken sailor, it will come under pressure. The Opposition will scrutinise the mini-budget to see whether the Government is starting to sell assets to fund the recurrent black hole. We will be watching every line of the mini-budget to ensure that the Government does not resort to asset sales to fund recurrent bad discipline, which is such a hallmark of this Government.
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